3min chapter

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Rational Minds Part 3: Rethinking Bubbles - Vernon Smith

The Joe Walker Podcast

CHAPTER

The Importance of Trust in Decision Making

In your Nobel lecture, you said that if people in certain contexts make choices that contradict our formal theory of rationality, rather than conclude that they are irrational, some ask why. Has behavioural economics strayed from the approach that you outlined? Well, I guess yes and no. Let's take a particular... Game that has attracted a lot of interest by behavioural economists. And that's a trust game. You see, this violates the notion that people just look at their own payoff and are concerned to maximise their own payoff.

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